Premium
R&D and Absorptive Capacity: Theory and Empirical Evidence*
Author(s) -
Griffith Rachel,
Redding Stephen,
Van Reenen John
Publication year - 2003
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00007
Subject(s) - economics , absorptive capacity , endogenous growth theory , total factor productivity , productivity , econometrics , growth theory , convergence (economics) , empirical evidence , microeconomics , neoclassical economics , macroeconomics , industrial organization , human capital , philosophy , epistemology , economic growth
This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for the reduced‐form equations for total factor productivity (TFP) growth frequently estimated empirically using industry‐level data. R&D affects both innovation and the assimilation of others’ discoveries (“absorptive capacity”). Long‐run cross‐country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity.